Global debt crisis : If it is said that the rich in the world are becoming richer and the poor are becoming poorer, it will not be an exaggeration. On one hand, the global economy is constantly growing, while on the other hand, developing countries are struggling with increasing debt. The burden of debt on countries is increasing. According to a report by the UN Trade and Development (UNCTAD), about 3.3 billion people live in countries where the amount of interest paid on debt is more than the expenditure on education or health. The Institute of International Finance estimates that the global debt will reach $315 trillion in the year 2024. This is 3 times the global GDP. At the same time, government debt around the world has increased 4 times compared to the year 2000.
Developing countries have a debt of $29 trillion
Global government debt is increasing rapidly. This has happened due to reasons like COVID-19, rise in food and energy prices, climate change, economic slowdown etc. Apart from this, irregular government expenditure and poor economic management are also a reason. In the year 2023, the total interest payment on government debt in developing countries reached $ 847 billion. This is a jump of 26 percent compared to 2021. The rate of increase in government debt in developing countries is twice that of developed countries. It increased to $ 29 trillion (30 percent of the total global) in 2023.
Debt to GDP ratio is increasing
Africa’s debt burden is growing faster than its economy, pushing up its debt-to-GDP ratio. The number of African countries with a debt-to-GDP ratio above 60 percent is set to increase from 6 to 27 between 2013 and 2023. This is due to unforeseen global issues that have slowed the economy and impacted expansion.
IMF’s help has the opposite effect
A report in The New York Times quoted Argentina’s former finance minister as saying, “IMF’s financial aid sometimes has the opposite effect. The IMF does give loans, but the interest rate on that loan is very high. This increases the debt burden on countries significantly.” According to a report, in the year 2023, 5 countries like Ukraine, Egypt, Argentina, Ecuador and Pakistan paid $2 billion only for surcharge. Surcharge is a burden on top of the interest on the loan. Due to this, paying the interest on the loan has also become a very challenging task for the borrowing countries.
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